Silver and Gold – Econlib

With the holidays upon us, what could be better than Christmas movies? And Christmas songs? And Christmas movies with great Christmas songs, like “Silver and Gold” as sung by Burl Ives in Rudolph, the Red-Nosed Reindeer? And of course, there’s the profit-seeking entrepreneur-prospector, Yukon Cornelius, obsessed with finding silver and gold. If silver and gold are so great, why don’t we use them for everything?

Silver conducts heat and electricity more efficiently than any other metal. Why don’t we wire our houses with it? Make electric stoves out of it? Or why don’t we do these things with gold? Gold is less conductive than silver or copper but has many other valuable properties: it is highly ductile and can be drawn into the thinnest wires, for example, and it does not corrode or tarnish. It’s also pretty, which is why Burl Ives sings, “Silver and gold/Mean so much more when I see/Silver and gold decorations/On every Christmas tree.”

The case of conductivity illustrates the importance of prices and monetary calculation. IT also explains why most silver and gold decorations on Christmas trees are fake. The “best” metal to use for a particular task is context-dependent. A bit of noodling around with Google and ChatGPT reveals several drawbacks to using gold for connections that require frequent plugging and unplugging, for example. Gold is conductive, ductile, and doesn’t tarnish; however, it’s also a lot softer than metals like chromium, nickel, and tin. It may not be what you want if you’re making the plugs for USB-C cables or vacuum cleaners.

Sometimes, I hear people object to the argument that raising labor costs with things like minimum wages and other regulations, because companies “will want to use the best technology they can.” But “best” depends on prices. Look at the computers people have in your workspace. Is there a top-of-the-line supercomputer on every desk? No, because you don’t need the Frontier system at Oak Ridge National Laboratory to check email or make spreadsheets–or, if you’re McDonald’s or Dollar General, to run self-checkout lines.

It all comes down to a version of the Great Economic Problem. The market is a continuous conversation among thinking, feeling agents, not a computational problem. When Ludwig von Mises and F.A. Hayek explained the problems with economic calculation under socialism, they were making an epistemic argument: rational economic calculation—perhaps, unfortunately, defined and described—is not a problem that can be solved with a sufficiently powerful computer, even the Frontier system.

Resources have alternative uses, and competing bids and offers in free markets enable us to use broadly dispersed knowledge as we allocate resources among those uses. The best metal to use to make an electrical connection depends on people’s ideas about how to make jewelry and cookware. If we find enough gold—say, through advances in asteroid mining and harvesting—then perhaps we can look forward to futures where robots cook our meals in pots and pans made of gold and silver (right before they decorate our trees with silver and gold decorations).